Of course, you, the reader, know that I was going to focus on Roberts’ Manufacturing Public Share Offer (PSO). I’ve been bombarded by calls and letters asking for my insight on the matter. I’m still flattered that public trust in me is displayed this way. However, I maintain that I won’t sway markets towards one decision or another. Some would have it that I say nothing at all; that I’ll ruffle feathers or undermine my people’s chance to share in wealth generated privately over 80-plus years. Yet I maintain that information and analysis make for more prudent decision-making by potential investors.
Interestingly, I don’t care if the deal is successful or not. There are other heartaches, such as those stemming from alleged statements by the Prime Minister seemingly indicating that the Transport Board was never in line for privatisation, that matter far more to the economic fabric of this country. Yes, political gaslighting does have larger impacts on GDP, whichever way.
Nonetheless, many of you haven’t taken the time to consult Roberts’ very thorough investment prospectus. I believe that the company has done enough through that document to sell its high and low points. They left no stone unturned, except for one glaring one, in my opinion. I’ll get to that. The general public just seems to think that it is taboo to fight through those 200-plus pages. Knowledge is power, and I do not have any more of it than you do.
The fear of missing out is glaring and obviously exploited by the PSO campaign. Appeals are being made to patriotism (I am not a fan), and to the perceived lack of investment opportunity on island (this is also not correct). What is accurate is that we haven’t had any well-marketed initial public offerings of any real sort since the Sagicor deal in the early 2000s. However, Productive Business Solutions (PBS) had one in 2017 on our local international stock exchange, though there has not been much trading since then.
Furthermore, Eppley, another Jamaican firm, has had a series of listings since May 2018. Buying shares in Eppley allows Bajans to be co-owners in commercial real estate across the island and elsewhere. There has also been a paucity of trading here, leading to minimal price action despite dismal financial results. Note that there are currently more shares for sale than in demand, indicating that Eppley’s already low price of 12 cents per share is not going anywhere. The point I am driving at is that opportunities come and go with new listings. They just do not seem to be marketed well. For me, however, it is just par for the course: these sorts of deals should always be marketed well. It ensures that the buying public is better informed and that financial managers and owners are fairly rewarded for creating value through a growing and/or profitable company.
Allow me the chance to explain. Proven Group’s buyout of Massy’s position in the company some years ago yielded immense reform, in my opinion. Roberts had, admittedly, a very basic manufacturing process by regional terms, though its profits stemmed from its successful business partnership, Pinnacle Feed. With its position as market leader fairly intact then, Roberts saw itself through a transition during the COVID-19 pandemic and beyond. It focused on deepening its export market potential and continually invested in manufacturing technology. All the while, its cash grew in line with its after-tax profitability following a rough financial year 2023. Proven’s part-ownership brought sustained efficiency improvements and, therefore, better cost containment.
A significant part of the improvement in profitability has admittedly been due to an accounting reclassification of parts of its operating expenditure. Think of this as mostly the sort of costs that pertain to the operation but have little to do with Roberts’ factory or manufacturing processes. Some of those costs were shifted to cost of goods sold, or direct manufacturing costs. The aforementioned efficiency gains are remarkable, indicated by a 17% reduction in the most recent audited financial results after being contained for a few years prior. This is despite the company having issues retaining specialised talent, which it has identified as a risk of note for investors.
Roberts was not a growing company. At least, that is based on the most recent figures provided in the prospectus. Those account for financial year 2025, which ended in March last year. I’ll be frank and say that I am bothered by the exclusion of at least the half-year results. The company gave slight mention to the first quarter of its now-concluded financial year 2026, which covers only April to June 2025. Lots has happened economically since then and must have had some economic and financial impact, including a potential further weakening of Roberts’ market leadership in feed.
I personally consider the earnings-per-share position, even in the recovery phase, to be weak. At BB$0.10 a share, it pales in comparison to Goddard Enterprises, for example, at BB$0.28 a share, which trades actively. I am thankful that the company has declared a postponement of the BB$3.6 million per annum management fee. The investing public is being told that half of earnings will be committed to dividend payouts. As it stands, those fees accounted for a third of profits, so their omission could give greater confidence to investors. Mind that dividend policy is set annually by the sitting board. According to the prospectus, it is strongly suggested that ANSA McAL and Proven will determine its composition and, therefore, whether dividends will be paid out, at least in the near term. It’s fine if you’re comfortable with that.
Lastly, I find the deal quite expensive, considering that the company is not a larger one by revenue and is being forced to focus on other areas for revenue. It is smaller and more efficient than it had been a few years ago. Nothing is inherently wrong with this. Roberts will gain no investment capital from this share sale and seemingly will commit to borrowing to finance growth. This is a prudent financial and tax strategy. But the company resembles a start-up: its growth is predicated on entry into, and expansion within, markets where it is still relatively untested. Its brands are known in the rest of the region but are by no means close to being market leaders yet. There is potential indeed, especially given its preferential borrowing rates.
But in the here and now, I calculated the value of each share at financial year 2025 to be approximately US$0.27, or about half of what the PSO is going for. The current valuation of $1.00 per share places the price at 20 times the last reported earnings figure. Compare this to Goddards, whose price is currently trading at less than 10 times earnings and which is still a market leader in a variety of products and service lines across the Caribbean and wider Latin America. Both are manufacturing firms at heart, but one is, in my opinion, way more expensive when profits are taken into consideration.